According to recent studies, the younger working class takes on credit card debt faster than any other generation, but pay it back much more slowly. While the recent economy has sparked much of this habit, the lasting consequences are troubling. Check out the following tips to help you improve your financial future and avoid long-term debt.
Make credit affordable. It’s possible. Find a card that offers reasonable interest rates and payment options. If you’re just starting out, there are plenty of cards that offer nice rates without overwhelming credit lines. For example, Summit has two great options in its Visa and Visa Rewards cards, both with excellent rates, 25-day grace periods on purchases and zero-liability fraud detection.
Avoid the minimum. While it may be tempting, it’s in your best “interest” to pay more than your monthly minimum payment – or ideally, pay off your balance every month. With compounding interest, a purchase of $500 could almost triple if you decide to pay if off with minimum payments. Pro tip: Try to keep your balance within 30% of your monthly income to ensure you can cover all expenses.
Go small with debit. Many people believe smaller purchases should be purchased with credit. However, those Friday lunch outings and morning mochas can truly add up and before you know it, you’re stuck with a sizeable credit bill. If you cannot pay off your credit card each month, it’s better to pay for smaller purchases with cash or debit and leave the bigger purchases to credit. It’ll pay off in the long run.
Remind yourself. It’s easy to lose track of how many times you use your credit card each month. To stay on track, create an alert to notify you via email or text when you’ve reached your limit. For example, Summit offers an eAlert system through its Online Branch that notifies members when they’re getting close to reaching their monthly limit.
Well there you go, all you young pros. Now you can Own your job and your credit. Be sure to check out all of Summit’s credit offerings and keep coming back to the Money Smarts blog for more best practices.